80-20 Rule – The Pareto Principle!
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Posted by Asma Zaineb, Manager Marketing Communications
Tue, Jul 13, 2010 @ 04:19 AM
The 80/20 principle talks about an inherent disparity between cause & outcome and effort & results. It explains that a minority of causes, i.e. 20%, effort, lead to a majority i.e. 80% of the rewards. To use the 80/20 rule, an individual should identify his or her current prospects and exploit them to its potential. This rule helps you identify the triggers allowing you to utilize the maximum power to the most dynamic forces and banishing any negative influences.
To harness the power of the 80/20 principle in your personal life, the two things you should do are:
- Identify key happiness triggers (20%) and
- Ditch the activities (80%) that provide little or no satisfaction
Some ways where you can apply the 80/20 principle:
- Foster important relationships
- Focus on memorable moments in your important relationships
- Read few and important books
- Let go of unused stuff
- Learn to use the tools you need the most
- Do away with meaningless activities
- Concentrate on your strengths
- Save for major expenses
- Do away with unproductive sources of income
- Make most of your productive time or condition
If you view your business from the 80/20 rule, you’ll realize that a handful of customers account for the major part of your income. These customers are long term users who benefit from your services.
To apply the 80/20 rule at work, find products or services that generate the most income (20%) and let go of the remaining (80%) products or services that provide secondary benefits. As a manager, you should work hard on essentials that work for you. That is, you should spend your time attending to those business segments that make the most of your core skills and leave the tasks that are beyond you to other people (20%). By letting go of bad clients and focusing on selling and improving service to the best clients, your business will flourish.
The message of the 80/20 principle is simple—focus on activities that produce the best outcomes for you, professionally and personally.
Do share your thoughts on the same.
Tags: 80-20 rule, Cause and Outcome, Effort and Results, Individual Development, Pareto Principle
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I have absolutely applied this rule, and in fact did so BEFORE I realized an instance of 80/20 was occuring. Several years ago I began noticing that although the training departments I worked for were putting out good efforts, most employees were picking up vast amounts of knowledge outside the classroom, webinar or eLearning. This lead me to begin studying the domain of Knowledge Management, to understand where organizational knowledge comes from, where it goes and how it got there. It wasn’t until just recently that research has pointed out that 80% of employee knowledge comes from informal sources (watercooler discussions, mentors, COP’s, etc) while only 20% comes from formal sources (training, documentation, etc). Recently this rsearch has lead me to new studies on Social Media applications within Learning & Development – most now call this Learn 2.0.
I certainly take account of Pareto’s principle, but it is often misunderstood. Pareto was an Italian economist, the extent of his observation (not a hard and fast rule) was that in a given system approximately 20% of the elements produced approximately 80% of the activity.
That is the extent of his principle. It is a useful GUIDE when managing any system or organisation, especially as a starting point, as to where you might allocate resources and what the cause/effect relationships are.
Since it is not a ‘rule’ as such you need to be prepared to accept that in certain situations it can be disproved. If you’re managing one of those situations then that is very important to know.
Like many useful concepts that begin in one field this one is often quite misunderstood and used to draw erroneous conclusions.
It is best used as a ‘gross error check’ and a useful starting point in the absence of better information.